Latin America Economics & Strategy Daily: Global Tariffs, Brazil Countermeasures, Mexico CPI, Argentina Issuance

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Latin America Economics & Strategy Daily: Global Tariffs, Brazil Countermeasures, Mexico CPI, Argentina Issuance

y from 1.1% in April. Retail sales also improved at the

margin, with their QoQ annualized growth rate turning positive at 1.2% in May from

-1.7% in April. These figures are consistent with a firmer 2Q26 growth profile

following the weakness observed in 1Q26. However, the June estimate still points

to a moderate pace of expansion, suggesting that any additional boost from World

Cup-related activity was likely more limited than initially anticipated.

Non-core food inflation helps headline CPI easing again. Bi-weekly inflation for

the 1H of July stood at 0.07% (3.10% YoY) vs our call of 0.04% and Citi survey

consensus of 0.10%, while core inflation stood at 0.16% (3.95% YoY) vs our call of

0.18% and consensus of 0.16%. The headline figure reflects downside pressure from

the non-core food index (-1.50% vs our call of -1.18%). The 1H July inflation print

reinforces the view that the recent decline in headline inflation is being driven

primarily by a handful of volatile non-core food items, whose disinflationary

contribution is unlikely to persist given their volatile/mean-reverting nature. As

such, the easing in headline inflation should carry limited weight for Banxico.

However, the continued favorable behavior of core inflation, which showed signs of

moderation at the margin, is more relevant. While our base case remains that

Banxico keeps the policy rate unchanged at 6.50% in 2026 and 2027, the

combination of subpar growth, a resilient peso, and well-behaved core inflation

could eventually lead the central bank to reconsider its stable-rate forward

guidance. That said, the scope for additional easing remains constrained by the risk